Firm would be better off being more prudent about their project selection. Higher payouts. Firm”s debt policy is considered. Is the firm attempting to move to its optimal debt ratio? Means for a firm to increase its leverage or debt ratio. Optimal debt ratio), it may choose to pay out more than its FCFE as dividends to increase leverage. Than its FCFE to decrease leverage. How much did the firm pay out? How much could it have afforded to pay out? Do you trust managers in the company with your cash? What investment opportunities does the firm have?